Final answer:
When you withdraw money from an ATM, you are engaging in a withdrawal transaction, which allows you to convert savings (M2) into liquid cash (M1) for use.
Step-by-step explanation:
Understanding Bank Transactions
When you stop at the ATM to get money out of your account before going to the store, you are making a Withdrawal. A withdrawal is a transaction where you take out money from your bank account.
This can easily be done at an automatic teller machine (ATM) or directly at the bank. This transaction is possible whether you have a checking account from which you can write checks or use a debit card, or a savings account where you might need to visit an ATM or bank for access.
The money you have in your savings account is part of what economists refer to as M2, which includes savings deposits. While M1, which is primarily composed of currency and checks, is more liquid and easier to spend, M2 can still be quickly converted to M1 by withdrawing money from an ATM.
Checking and savings accounts serve different purposes and have evolved over time. While a checking account facilitates transactions, a savings account usually pays some interest rate. The distinction between the two has become less clear, as some checking accounts now pay interest, and some savings accounts offer limited check writing abilities.